1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 0-22466
FTP SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2906463
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 HIGH STREET
NORTH ANDOVER, MASSACHUSETTS 01845
(Address of principal executive offices)
(Zip Code)
(978) 685-4000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, Par Value $.01 Per Share 34,035,463
- -------------------------------------- ------------------------------
Class Outstanding at August 11, 1998
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FTP SOFTWARE, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 (unaudited) 3
Consolidated Statements of Operations for the three and
six months ended June 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 (unaudited) 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
Signature 24
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FTP SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1998 1997
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 38,596 $ 37,569
Short-term investments 10,564 14,234
Accounts receivable, net of allowance for
doubtful accounts of $1,250 and 1,100 for
1998 and 1997, respectively 4,611 8,282
Prepaid expenses and other current assets 2,111 2,580
Refundable incomes taxes 2,975 3,165
-------- --------
Total current assets 58,857 65,830
Property and equipment, net 6,253 8,301
Purchased software, net 1,738 2,621
Investments 14,726 19,767
Other assets 1,377 956
-------- --------
Total assets $ 82,951 $ 97,475
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses (Note 2) $ 7,831 $ 10,976
Income taxes payable 1,786 1,613
Accrued employee compensation and benefits 1,760 3,652
Deferred revenue 5,654 5,715
-------- --------
Total liabilities 17,031 21,956
-------- --------
Stockholders' equity:
Preferred stock, $0.01 par value;
authorized 5,000,000 shares;
none issued and outstanding -- --
Common stock, $0.01 par value;
authorized 100,000,000 shares;
issued and outstanding 34,035,463 and
33,973,140 in 1998 and 1997, respectively 340 339
Additional paid-in capital 136,823 136,792
Accumulated deficit (71,682) (62,046)
Equity adjustments 439 434
-------- --------
Total stockholders' equity 65,920 75,519
======== ========
Total liabilities and stockholders' equity $ 82,951 $ 97,475
======== ========
The accompanying notes are an integral part of these financial statements.
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FTP SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
Revenue:
Product revenue $ 5,434 $ 13,073 $ 13,133 $ 29,899
Service revenue 2,894 4,673 6,123 9,202
-------- -------- -------- --------
Total revenue 8,328 17,746 19,256 39,101
-------- -------- -------- --------
Cost of revenue:
Product cost 1,164 3,964 2,344 6,953
Service cost 1,452 2,924 2,817 5,818
-------- -------- -------- --------
Total cost of revenue 2,616 6,888 5,161 12,771
-------- -------- -------- --------
Gross margin 5,712 10,858 14,095 26,330
-------- -------- -------- --------
Operating expenses:
Sales and marketing 6,571 13,115 12,731 27,396
Product development 3,517 8,375 7,126 16,230
General and administrative 2,461 4,612 5,802 8,947
-------- -------- -------- --------
Total operating expenses 12,549 26,102 25,659 52,573
-------- -------- -------- --------
Loss from operations (6,837) (15,244) (11,564) (26,243)
Investment and other income, net 1,068 1,150 2,078 1,785
-------- -------- -------- --------
Loss before income taxes (5,769) (14,094) (9,486) (24,458)
Provision (benefit) for income taxes 50 342 150 992
-------- -------- -------- --------
Net loss $ (5,819) $(14,436) $ (9,636) $(25,450)
======== ======== ======== ========
Basic and diluted net loss per share $ (0.17) $ (0.43) $ (0.28) $ (0.75)
======== ======== ======== ========
Weighted average common
shares outstanding 34,024 33,842 34,024 33,775
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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FTP SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
SIX MONTHS ENDED JUNE 30,
1998 1997
----------- ----------
Cash flows from operating activities:
Net loss from continuing operations $(9,636) $(25,450)
Adjustments to reconcile net loss from
continuing operations to net cash provided by
(used for) operating activities:
Depreciation and amortization 3,110 6,548
Loss on disposition of property and equipment 10 650
Amortization (accretion) of discounts and premiums
on investments 19 (83)
Changes in operating assets and liabilities:
Accounts receivable 3,671 6,363
Prepaid expenses and other current assets 469 485
Income taxes 190 743
Other assets (469) (591)
Accounts payable and accrued expenses (2,972) (1,463)
Accrued employee compensation and benefits (1,892) 1,803
Deferred revenue (61) (1,542)
-------- --------
Net cash used for continuing operations (7,561) (12,537)
Net cash provided by discontinued operations -- 2,209
-------- --------
Net cash used for operating activities (7,561) (10,328)
-------- --------
Cash flows from investing activities:
Capital expenditures (141) (2,576)
Maturities of investments, net 8,752 9,011
-------- --------
Net cash provided by investing activities 8,611 6,435
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 31 503
Principal payments on long-term obligations -- (240)
-------- --------
Net cash provided by financing activities 31 263
-------- --------
Effect of exchange rate changes on cash (54) 17
-------- --------
Net increase (decrease) in cash and cash equivalents 1,027 (3,613)
Cash and cash equivalents, beginning of period 37,569 22,036
-------- --------
Cash and cash equivalents, end of period $ 38,596 $ 18,423
======== ========
The accompanying notes are an integral part of these financial statements.
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL DATA
The accompanying unaudited consolidated financial statements have
been prepared by FTP Software, Inc. (the "Company") in accordance with generally
accepted accounting principles. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments, consisting
only of those of a normal recurring nature, necessary for a fair presentation of
the Company's financial position, results of operations and cash flows at the
dates and for the periods indicated. While the Company believes that the
disclosures presented are adequate to make the information not misleading, these
financial statements should be read in conjunction with the audited consolidated
financial statements and notes related thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
The results of the three- and six-month periods ended June 30, 1998
are not necessarily indicative of the results to be expected for the full fiscal
year. The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. RESTRUCTURE CHARGES
In July 1997, the Company reorganized its operations into business
units and effected a worldwide workforce reduction in order to lower the
Company's overall cost structure and create greater focus on specific strategic
business opportunities. This restructuring resulted in a charge of approximately
$17.1 million ($0.50 per share) in the third quarter of 1997. This charge
included severance related payments, excess facilities costs, the write-off of
fixed assets and other restructuring-related items such as losses related to
cancelled contracts; such costs were substantially completed in 1997.
In late December 1997, following a review of the financial results of
its business units for the second half of 1997, the Company decided to further
streamline its operations and to recombine its business units into one worldwide
organization. This restructuring resulted in a charge of approximately $1.3
million ($0.04 per share) in the fourth quarter of 1997. This charge included
costs similar to those incurred in connection with the third quarter
restructuring; these costs were substantially completed in the first quarter of
1998.
The following summarizes the 1997 restructuring charges, the related
write-offs and cash paid in connection with the restructurings for the six
months ended June 30, 1998 (dollars in thousands, unaudited):
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Severance Excess
Payments Facilities Other Total
--------- ---------- ----- -----
Accrued restructuring charge at
December 31, 1997 $ 766 $ 1,710 $ 268 $ 2,744
Cash paid (858) (1,353) (33) (2,244)
Reclassifications 92 143 (235) --
----- ------- ----- -------
Accrued restructuring charge at
June 30, 1998 $ 0 $ 500 $ 0 $ 500
===== ======= ===== =======
Amounts related to severance with respect to the July 1997 workforce
reduction involved approximately 300 employees, primarily in sales and
marketing, product development and general and administrative functions at the
Company's domestic and European locations. Amounts related to facilities reflect
the cost of the lease of excess space arising primarily from the consolidation
of the Company's Massachusetts headquarters and manufacturing facilities into
the Company's North Andover, Massachusetts development offices.
Amounts related to severance with respect to the December 1997
workforce reduction involved approximately 21 employees, primarily in
development, at the Company's European locations. Amounts related to facilities
reflect the cost of the lease of excess space at the Company's U.K. facility.
3. LEGAL PROCEEDINGS
In March 1996, a class action lawsuit was filed in the United States
District Court for the District of Massachusetts, naming the Company and certain
of its current and former officers as defendants. The lawsuit, captioned
LAWRENCE M. GREEBEL V. FTP SOFTWARE, INC., ET AL., Civil Action No. 96-10544,
alleges that the defendants publicly issued false and misleading statements and
omitted to disclose material facts necessary to make such statements not false
and misleading, which the plaintiffs contend caused an artificial inflation in
the price of the Company's common stock. Specifically, the original complaint
alleged that the defendants knowingly concealed adverse facts and made false or
misleading forward and non-forward looking statements concerning the operating
results and financial condition of the Company, the effects of the Company's
July 1995 corporate restructuring and changing competitive factors in the
Company's industry. The lawsuit, which is purportedly brought on behalf of a
class of purchasers of the Company's common stock during the period from July
14, 1995 to January 3, 1996, alleges violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
10b-5 thereunder and seeks relief in the form of unspecified compensatory
damages, costs and expenses and such other relief as the court deems proper and
just. In August 1996, plaintiffs filed an amended complaint adding allegations
concerning what plaintiffs claim were wrongful sales and accounting practices by
the Company during the class period, but asserting the same causes of action as
the original complaint. In October 1996, the Company filed a motion to dismiss
the complaint on the grounds that the plaintiffs had not met the pleading
requirements of the Private Securities
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Litigation Reform Act of 1995. The motion was denied by the court on
February 13, 1997. On February 13, 1998, FTP filed a motion for partial summary
judgment and renewed motion to dismiss; plaintiffs filed their response on
March 20, 1998. The court has not yet set a date for a hearing on these motions.
The Company has reviewed the allegations in the lawsuit, believes
them to be without merit, and intends to defend itself and its officers
vigorously. In order to support an adequate defense, the Company has spent and
expects to continue to spend substantial sums for legal and expert fees and
costs. The cost of defending the litigation and the outcome of the litigation
are uncertain and cannot be estimated. If the lawsuit were determined adversely
to the Company, the Company could be required to pay a substantial judgment,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.
In February 1996, a class action lawsuit, captioned RICHARD ZEID AND
SIOM MISRAH, ET AL. V. JOHN KIMBERLEY, FRANK M. RICHARDSON, MARK A. ROWLINSON
AND FIREFOX COMMUNICATIONS, INC., Case No. C96 20136, was filed in the United
States District Court for the Northern District of California, San Francisco
Division (transferred to the San Jose Division), naming Firefox Communications
Inc., which the Company acquired in July 1996 ("Firefox"), and certain of its
current and former officers and former directors as defendants. The original
complaint alleged that the defendants misrepresented or failed to disclose
material facts about Firefox's operations and financial results, which the
plaintiffs contended resulted in an artificial inflation in the price of
Firefox's common stock. The suit was purportedly brought on behalf of a class of
purchasers of Firefox's common stock during the period from August 3, 1995 to
January 2, 1996. The complaint alleged claims for violations of Sections 10(b)
and 20(a) of the Exchange Act and Rule 10b-5 thereunder and sought relief in the
form of unspecified compensatory damages, pre- and post-judgment interest,
attorneys' and expert witness fees and such extraordinary, equitable and/or
injunctive relief as permitted by law, equity and the federal statutory
provisions under which the suit was brought. In June 1996, the District Court
entered an order dismissing plaintiffs' complaint. In the order, the court
dismissed with prejudice certain of plaintiffs' claims that warnings and
disclosures in Firefox's Form 10-Qs were false and misleading, while granting
plaintiffs permission to amend their complaint as it concerned certain of
plaintiffs' claims that Firefox was responsible for false and misleading
analysts reports, Firefox statements and financial statements.
In July 1996, plaintiffs filed their amended complaint. The amended
complaint alleged that defendants misrepresented or failed to disclose material
facts about Firefox's operations and financial results which the plaintiffs
contended resulted in an artificial inflation of the price of Firefox's common
stock. The amended complaint was purportedly brought on behalf of a class of
purchasers of Firefox's common stock during the period from July 20, 1995 to
January 2, 1996. The amended complaint again alleged claims for violations of
Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder and
sought relief in the form described above. Specifically, the amended complaint
alleged that defendants knew allegedly material adverse non-public information
about Firefox's financial results and business conditions which allegedly was
not disclosed, that they improperly directed that certain sales and revenues be
recognized and failed to keep adequate reserves and that they participated in
drafting, reviewing and/or approving allegedly misleading statements, releases,
analysts reports and other public representations, including disclaimers and
warnings of and about Firefox. The amended complaint also alleged that John A.
Kimberley, then an officer and director of Firefox, and Frank Richardson, a
former
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
officer and director of Firefox, were liable as "controlling persons" of
Firefox. In September 1996, Firefox filed a motion to dismiss the amended
complaint on the grounds that the plaintiffs had not met the pleading
requirements of the Private Securities Litigation Reform Act of 1995. On May 8,
1997, the court dismissed the amended complaint on such grounds, without leave
to amend. Plaintiffs have appealed the dismissal to the Ninth Circuit Court of
Appeals; oral argument on the appeal has been set for September 14, 1998.
Firefox has reviewed the allegations in the lawsuit, believes them to
be without merit, and intends to defend itself and its officers and directors
vigorously. In order to support an adequate defense, Firefox has spent and
expects to continue to spend substantial sums for legal and expert fees and
costs. The cost of defending the litigation and the outcome of the litigation
are uncertain and cannot be estimated. If the lawsuit were determined adversely
to Firefox, Firefox could be required to pay a substantial judgment, which could
have a material adverse effect on Firefox's business, financial condition and
results of operations.
4. EARNINGS PER SHARE
The earnings per share ("EPS") amounts have been computed in
accordance with SFAS No. 128, "Earnings per Share," which requires the
presentation of basic and diluted EPS. This Statement requires restatement of
all prior period EPS amounts presented after the effective date. Adoption of the
provisions of SFAS No. 128 had no impact on reported EPS for the three- and
six-month periods ended June 30, 1998 and 1997, as the effect of common stock
equivalents would have been anti-dilutive during such periods. A reconciliation
of the loss and share information used in the basic and diluted per share
computation for the three- and six-month periods ended June 30, 1998 and 1997
are as follows (in thousands, except per share amounts, unaudited):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
Net loss $ (5,819) $(14,436) $ (9,636) $(25,450)
======== ======== ======== ========
Weighted average shares outstanding 34,024 33,842 34,024 33,775
Effect of dilutive securities -- -- -- --
-------- -------- -------- --------
Basic and diluted shares outstanding $ 34,024 $ 33,842 $ 34,024 $ 33,775
======== ======== ======== ========
Basic and diluted loss per share $ (0.17) $ (0.43) $ (0.28) $ (0.75)
======== ======== ======== ========
Options to purchase 5,995 and 5,014 shares of common stock were
outstanding at June 30, 1998 and 1997, respectively. The diluted EPS computation
for the three- and six-month periods then ended did not include these additional
shares because the effect would have been anti-dilutive.
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. COMPREHENSIVE INCOME (LOSS)
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components (revenue,
expenses, gains and losses) in a full set of general-purpose financial
statements. This statement also requires that an entity classify items of other
comprehensive earnings by their nature in a financial statement. For example,
other comprehensive earnings may include foreign currency translation
adjustments and unrealized gains and losses on marketable securities classified
as available-for-sale. The Company adopted the provisions of SFAS No. 130
effective January 1, 1998 and will present such information in its Statement of
Stockholders' Equity. The Company's total comprehensive losses for the three-
and six-month periods ended June 30, 1998 and 1997 were as follows (in
thousands, unaudited):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- --------- -------- ---------
Net loss $(5,819) $(14,436) $(9,636) $(25,450)
Other comprehensive income (loss)
Foreign currency translation
adjustments 430 (120) (63) 115
Unrealized gain (loss) on securities 21 1,806 58 (93)
Add: reclassification adjustment for
(gains) losses included in net income (2) 24 35 45
------- -------- ------- --------
Other comprehensive income (loss) $ 449 $ 1,710 $ 30 $ 67
------- -------- ------- --------
Comprehensive loss $(5,370) $(12,726) $(9,606) $(25,383)
======= ======== ======= ========
6. OTHER RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131, "Disclosure about Segments of an Enterprise." SFAS No. 131 changes the
way public companies report information about operating segments. SFAS No. 131,
which is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly and to report
entity-wide disclosures about products and services, major customers and the
material countries in which the entity holds assets and reports revenue. The
Company intends to adopt SFAS No. 131 for its fiscal year ending December 31,
1998. Management does not expect such adoption to have any material impact on
the way it reports information.
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
7. AGREEMENT AND PLAN OF REORGANIZATION WITH NETMANAGE, INC.
On June 15, 1998, the Company entered into an Agreement and Plan of
Reorganization with NetManage, Inc. ("NetManage") whereby a subsidiary of
NetManage will be merged into the Company, which will survive the merger as a
wholly-owned subsidiary of NetManage, and each outstanding share of the common
stock of the Company will be converted into 0.72767, subject to adjustment, of
a share of NetManage common stock, subject to the conditions set forth in the
Reorganization Agreement. Outstanding Company stock options will be converted
into options to purchase shares of NetManage common stock at the same
conversion rate, with appropriate changes to the exercise price. This merger,
which is intended to be accounted for as a pooling of interests, is conditioned
on, among other things, approval of the merger by the Company's stockholders
and approval by NetManage's stockholders of the issuance of the shares of
NetManage common stock in the merger.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis provides information that
management of FTP Software, Inc. ("FTP" or the "Company") believes is relevant
to an assessment and understanding of the Company's consolidated results of
operations and financial condition. This discussion should be read in
conjunction with the Company's consolidated financial statements and the related
notes included above.
FORWARD-LOOKING STATEMENTS IN THIS SECTION AND ELSEWHERE IN THIS
REPORT ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES, AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED
IN THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT FOR A VARIETY OF
REASONS. THESE REASONS INCLUDE, BUT ARE NOT LIMITED TO, RISKS RELATING TO
CONSUMMATION OF THE MERGER OF THE COMPANY WITH A SUBSIDIARY OF NETMANAGE, INC.
("NETMANAGE") DESCRIBED BELOW (THE "MERGER"), COMPETITION, COMPETITIVE PRICING
PRESSURES, CHANGES IN PERSONNEL, TECHNOLOGICAL AND OTHER MARKET CHANGES,
DEPENDENCE ON NEW PRODUCTS, DISTRIBUTION RISKS AND OTHER RISKS THAT ARE OUTLINED
BELOW AND IN EXHIBIT 99 TO THIS REPORT. THE MERGER IS SUBJECT TO A NUMBER OF
CONDITIONS, INCLUDING THOSE OUTLINED BELOW, THAT MAY NOT BE SATISFIED. OTHER
RISKS AND UNCERTAINTIES ASSOCIATED WITH THE MERGER ARE DESCRIBED IN THE JOINT
PROXY STATEMENT/PROSPECTUS OF THE COMPANY AND NETMANAGE, WHICH IS INCLUDED IN
NETMANAGE'S REGISTRATION STATEMENT ON FORM S-4 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON JULY 15, 1998.
RECENT DEVELOPMENTS
The Company is engaged in the design, development, marketing and
support of connectivity software applications that enable users to connect to
information across TCP/IP networks, including data residing on mainframes,
minicomputers and servers. These applications include terminal emulation, NFS
file sharing and printing, file transfer and legacy host access.
The Company has entered into an Agreement and Plan of Reorganization
dated as of June 15, 1998, as amended on June 30, 1998 and July 14, 1998 (the
"Reorganization Agreement"), with NetManage and Amanda Acquisition Corp., a
wholly-owned subsidiary of NetManage ("Merger Sub"), which provides for the
acquisition of the Company by NetManage through a merger of the Company with
Merger Sub (the "Merger") whereby each outstanding share of the Common Stock,
par value $0.01 per share, of the Company ("Common Stock") will be converted
into the right to receive, subject to downward adjustment as described below,
0.72767 of a share (the "Exchange Ratio") of the Common Stock, par value $0.01
per share, of NetManage ("NetManage Common Stock"), subject to the conditions
set forth in the Reorganization Agreement. Because FTP has met certain of the
financial tests set forth in the Reorganization Agreement, the Exchange Ratio
would not be adjusted if the closing of the Merger occurs before August 31,
1998, as currently expected.
The closing of the Merger is subject to a number of conditions,
including (a) certain approvals by the stockholders of the Company and the
stockholders of NetManage, respectively, (b) the receipt by NetManage of letters
from the independent accountants for each of NetManage and the Company to the
effect that they concur with the conclusion of the management of the respective
companies that the Merger will qualify for pooling of interests accounting
treatment and (c) the absence of any material adverse effect, as defined in the
Reorganization Agreement, with respect to either the Company or NetManage.
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RESULTS OF OPERATIONS
TOTAL REVENUE
Total revenue consists of product revenue and service revenue.
Product revenue includes revenue from product sales and royalties from certain
OEM customers. Service revenue includes revenue from support, consulting and
training. Payments received in advance for support contracts are initially
recorded as deferred revenue and are recognized ratably over the term of the
contract. Revenue from consulting and training is recognized as the services are
performed.
Total revenue decreased to approximately $8.3 million for the second
quarter of 1998 from approximately $17.7 million for the second quarter of 1997.
Product revenue decreased to approximately $5.4 million for the second quarter
of 1998 from approximately $13.1 million for the second quarter of 1997. Service
revenue decreased to approximately $2.9 million for the second quarter of 1998
from approximately $4.7 million for the second quarter of 1997. As a percentage
of total revenue, product revenue decreased to approximately 65% for the second
quarter of 1998 from approximately 74% for the second quarter of 1997, and
service revenue increased to approximately 35% for the second quarter of 1998
from approximately 26% for the second quarter of 1997.
The Company's total revenue decreased to approximately $19.3 million
for the first six months of 1998 from approximately $39.1 million for the first
six months of 1997. Product revenue decreased to approximately $13.1 million for
the first six months of 1998 from approximately $29.9 million for the first six
months of 1997. Service revenue decreased to approximately $6.1 million for the
first six months of 1998 from approximately $9.2 million for the first six
months of 1997. As a percentage of total revenue, product revenue decreased to
approximately 68% for the first six months of 1998 from approximately 76% for
the first six months of 1997, and service revenue increased to approximately 32%
for the first six months of 1998 from approximately 24% for the first six months
of 1997.
PRODUCT REVENUE. Product revenue decreased for the three- and
six-month periods ended June 30, 1998 compared to the same periods of 1997, both
in dollar amount and as a percentage of total revenue, primarily as a result of
decreases in sales volumes and, to a lesser extent, sales prices for certain of
the Company's products over such periods. The Company believes these decreases
are primarily attributable to the increase in lower-priced or no cost TCP/IP
connectivity products introduced by certain of the Company's competitors
commencing in late 1995, an increase in competition in the networking
applications segment of the networking software industry beginning in 1997 and
decreases in customer demand for DOS-based and 16-bit Windows-based products
since 1996. In addition, the Company believes that customers may have deferred
purchasing decisions in the latter half of June 1998 as a result of the
Company's June 15, 1998 announcement of the Reorganization Agreement, which may
also have contributed to the decrease in product revenue for the second quarter
of 1998. The Company also believes that the impact of the Company's July 1997
restructuring on the business activities of the Company, as well as a disruption
in U.S. sales resulting from the implementation during the third quarter of 1997
of the Company's plans to increase sales in the U.S. through indirect channels,
also contributed to the decrease in sales for the first six months of 1998
compared to the same period of 1997. See also "-- Factors Affecting Revenue"
below. In addition, product revenue for 1997 included payments from a strategic
partner. Revenues under this contract for 1998 will be substantially less than
1997 revenues under this contract, and the Company does not expect to receive
additional revenues under this contract following the third quarter of 1998.
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14
SERVICE REVENUE. The dollar decreases in service revenue for the
second quarter and first six months of 1998 compared to the same periods in
1997 are primarily attributable to a decrease in the Company's installed
product base during 1997 and an increase in the sale of support contracts
through indirect channels (which resulted in a decrease in the Company's
operating margins on such sales due to the lower per unit revenue realized by
the Company on such sales) beginning in the third quarter of 1997. The
percentage increases in the second quarter and first six months of 1998
compared to the same periods in 1997 are primarily due to the decrease in
product revenue described above.
INTERNATIONAL REVENUE. International sales consist of export sales,
primarily to customers in Europe, Asia Pacific, Latin America and Canada.
International sales of approximately $2.7 million and $8.2 million accounted for
approximately 33% and 46% of the Company's total revenue for the second quarter
of 1998 and 1997, respectively. International sales of approximately $7.9
million and $17.7 million accounted for approximately 41% and 45% of the
Company's total revenue for the first six months of 1998 and 1997, respectively.
The dollar decreases in the second quarter and first six months of 1998 compared
to the same periods in 1997 are attributable to the same factors that resulted
in the decreases in total product revenue over these periods described above
under "-- Product Revenue."
The Company prices, invoices and collects international sales
primarily in United States dollars. To date, currency fluctuations have not had
a material effect on the Company's results of operations and financial
condition.
FACTORS AFFECTING REVENUE. The Company has experienced a decrease in
sales volumes since 1995 and a decrease in sales prices during various periods
since 1995, which decreases the Company believes are primarily attributable to
increased competition, particularly the increase during 1997 in competition in
the networking applications software market, as well as to technological changes
in the market. Looking forward, if the Merger is not consummated, the Company
anticipates that some or all of these trends will continue, and believes that
the Company's future is substantially dependent on the ability of the Company
(i) to create greater focus on specific product opportunities and customer needs
within the Company's product categories, (ii) to formulate and implement its
sales and distribution strategies to most effectively take advantage of
strategic opportunities in its various product categories, (iii) to successfully
develop new product strategies and to timely release new products and product
enhancements, (iv) to take advantage of the emerging web-based networking
applications software market and the continued development of such market and
(v) to enter into and implement strategic alliances and OEM relationships to
develop necessary products or technologies, to expand the Company's distribution
channels or to jointly market or gain market awareness for the Company's
products. If the Company is unsuccessful in any such regard, or if the web-based
networking applications software market does not develop as anticipated by the
Company, the Company believes that the trends described above will continue to
have a material adverse effect on the Company's business, results of operations
and financial condition. Even if the Company is successful in implementing new
product strategies, there can be no assurance that it will result in a material
improvement in the Company's business, results of operations or financial
condition.
The number of the Company's employees decreased significantly during
1997 and the first six months of 1998, both prior to and following the Company's
July and December 1997 restructurings, as a result both of the restructurings
and significant competition for qualified personnel in the industry. The Company
believes that this decrease, which resulted in significant turnover in the
Company's U.S. sales force, contributed to the decline in revenue for the first
six months of 1998. In connection with the July 1997 restructuring, the Company
reduced its workforce by approximately 300 employees in total. The Company has
experienced additional attrition during late 1997 and the first six months of
1998. As a
14
15
result of the Company's December 1997 restructuring, which included a workforce
reduction involving approximately 21 employees, and attrition experienced in the
first half of 1998, the number of the Company's employees has decreased from
approximately 350 at December 31, 1997 to approximately 262 at June 30, 1998.
The Company's ability to maintain or increase revenue will depend in part on its
ability to retain, hire and train qualified personnel.
During the third quarter of 1997, the Company increased its focus in
the United States on sales through distributors, value-added resellers, systems
integrators and OEMs rather than direct sales, including, among other things, by
entering into an agreement with a third party that provides for the sale by such
party on behalf of the Company of certain maintenance services, support services
and products in the U.S. and Canada, with certain limited geographic exclusivity
with respect to certain of such services. While the third party arrangement
described above was intended to increase sales of the Company's products and
services in the U.S., there can be no assurance that such arrangement will be
successful or that sales of such products and services will not decrease as a
result. As noted above under "-- Service Revenue," service revenue decreased
during the second quarter and first half of 1998 due in part to an increase in
sales of support contracts through indirect channels. The Company continues to
evaluate its other distribution channels in the ordinary course of business.
Additional changes in distribution channels may adversely affect sales of the
Company's products and consequently may adversely affect the Company's business,
financial condition and results of operations, at least in the near term. Any
material increase in sales through indirect channels may have an adverse effect
on the Company's operating margins due to the lower per unit revenue realized by
the Company on sales through indirect channels if the Company is unable to
proportionately reduce selling, general and administrative expenses.
See "-- Liquidity and Capital Resources" below for a description of
certain legal proceedings and Exhibit 99 for additional discussion of the
factors described above and other factors which may affect the Company's
business, financial condition and results of operations.
GROSS MARGIN
Product gross margin as a percentage of product revenue was
approximately 79% and 70% in the second quarter of 1998 and 1997, respectively.
Product gross margin as a percentage of product revenue was approximately 82%
and 77% in the first six months of 1998 and 1997, respectively. These increases
resulted primarily from a decrease in both costs associated with the
amortization of technologies licensed or purchased in 1995 and 1996 and costs
associated with the localization of certain of the Company's products, partially
offset by the decrease in product revenue described under "-- Product Revenue"
above. Amortization expense was approximately $0.5 million and $1.6 million in
the second quarter of 1998 and 1997, respectively, and approximately $1.0
million and $2.7 million in the first six months of 1998 and 1997, respectively.
Service gross margin as a percentage of service revenue increased to
approximately 50% in the second quarter of 1998 from approximately 37% in the
second quarter of 1997. Service gross margin as a percentage of service revenue
increased to approximately 54% in the first six months of 1998 from
approximately 37% in the first six months of 1997. These increases were
primarily due to a reduction in costs related to a decrease in professional
services and technical support personnel resulting from the Company's July 1997
restructuring and workforce reduction.
The gross margins reported above are not necessarily indicative of
gross margin for future periods, which may vary significantly depending on,
among other things, changes in product strategy and
15
16
mix, price competition, technological changes, cost changes and changes in
product distribution channels.
SALES AND MARKETING
Sales and marketing expenses were approximately $6.6 million and
$13.1 million in the second quarter of 1998 and 1997, respectively. Such
expenses as a percentage of total revenue were approximately 79% and 74% in the
second quarter of 1998 and 1997, respectively. Sales and marketing expenses were
approximately $12.7 million and $27.4 million in the first six months of 1998
and 1997, respectively. Such expenses as a percentage of total revenue were
approximately 66% and 70% in the first six months of 1998 and 1997,
respectively. The $6.5 million decrease in the second quarter of 1998 and the
$14.7 million decrease in the first six months of 1998 reflect decreases in
sales and marketing personnel resulting primarily from the Company's 1997
restructurings, as well as a decrease in the levels of the Company's
advertising, tradeshow and other marketing activities over such periods. The
percentage decrease in the first six months of 1998 compared to the same period
in 1997 was also primarily due to such factors. The percentage increase in the
second quarter of 1998 compared to the second quarter of 1997 was primarily due
to the decrease in total revenue over such periods.
If the Merger is not consummated, FTP expects that the dollar amount
of sales and marketing expenses will continue to decrease in 1998 from 1997
dollar amounts as a result of the Company's 1997 restructurings.
PRODUCT DEVELOPMENT
Product development expenses were approximately $3.5 million and
$8.4 million in the second quarter of 1998 and 1997, respectively, representing
approximately 42% and 47% of total revenue for each period, respectively.
Product development expenses were approximately $7.1 million and $16.2 million
in the first six months of 1998 and 1997, respectively, representing
approximately 37% and 42% of total revenue for each period, respectively. The
$4.9 million decrease in the second quarter of 1998 and the $9.1 million
decrease in the first six months of 1998 primarily reflect decreases in
development personnel resulting primarily from the Company's 1997
restructurings. The percentage decreases over such periods were also primarily
due to this factor.
If the Merger is not consummated, FTP expects that the dollar amount
of product development expenses will continue to decrease in 1998 from 1997
dollar amounts as a result of the Company's 1997 restructurings.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were approximately $2.5 million
and $4.6 million in the second quarter of 1998 and 1997, respectively,
representing approximately 30% and 26% of total revenue for each period,
respectively. General and administrative expenses were approximately
$5.8 million and $8.9 million in the first six months of 1998 and 1997,
respectively, representing approximately 30% and 23% of total revenue for each
period, respectively. The $2.1 million decrease in the second quarter of 1998
and the $3.1 million decrease in the first six months of 1998 were primarily the
result of a decrease in general and administrative personnel resulting primarily
from the Company's 1997 restructurings and costs incurred in 1997 in connection
with the defense of the legal proceedings described under "-- Liquidity and
Capital Resources" below. The percentage increases over such periods
16
17
were primarily due to the decreases in total revenue over such periods described
above under "-- Total Revenue."
If the Merger is not consummated, FTP expects that the dollar amount
of general and administrative expenses will continue to decrease in 1998 from
1997 dollar amounts as a result of the Company's 1997 restructurings.
OPERATING LOSS
The Company experienced losses from operations of approximately $5.8
million and $14.4 million in the second quarter of 1998 and 1997, respectively,
representing approximately 70% and 81% of total revenue for each period,
respectively. The Company had losses from operations of approximately $9.6
million and $25.5 million in the first six months of 1998 and 1997,
respectively, representing approximately 50% and 65% of total revenue for each
period, respectively. These decreases in losses were primarily due to the
decreases in expenses over such periods described above.
INVESTMENT AND OTHER INCOME, NET
Investment and other income, net, was approximately $1.1 million and
$1.2 million for the second quarter of 1998 and 1997, respectively, and
approximately $2.1 million and $1.8 million for the first six months of 1998 and
1997, respectively. The increase in the first six months of 1998 compared to the
same period in 1997 was primarily due to a loss on disposal of fixed assets
recognized in the second quarter of 1997. The Company invests excess cash in
high grade municipal bonds, U.S. government treasury obligations, high grade
corporate obligations and equity investments.
PROVISION FOR INCOME TAXES
The provision for income taxes was approximately $0.1 million and
$0.3 million in the second quarter of 1998 and 1997, respectively, and
approximately $0.2 million and $1.0 million in the first six months of 1998 and
1997, respectively. The provision represents certain foreign and state tax
obligations which cannot be offset by the Company's net operating losses. Due to
the uncertainty as to when the deferred tax assets may be realized, the Company
has recorded a valuation allowance for all tax assets in excess of amounts
available to be recovered pursuant to tax loss carrybacks.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had an aggregate of approximately
$63.9 million in cash and cash equivalents, short-term investments and long-term
investments. Of this amount, approximately $38.6 million was invested primarily
in highly liquid investments with original maturities of three months or less,
approximately $10.6 million was invested in short-term investments consisting of
U.S. government obligations and commercial paper with maturities of less than
one year, and approximately $14.7 million was invested in U.S. government
obligations, commercial paper and municipal obligations with maturities of
greater than one year.
The Company used approximately $7.6 million and $12.8 million of cash
for operations in the first six months of 1998 and 1997, respectively. The
Company made capital expenditures of approximately $0.1 million and $2.4 million
in the first six months of 1998 and 1997, respectively.
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18
Accounts receivable, net, decreased to approximately $4.6 million at
June 30, 1998 from approximately $8.3 million at December 31, 1997. This
decrease is primarily attributable to the decrease in total revenue during the
second quarter of 1998 described above under "-- Total Revenue" as well as an
increase in collections of the Company's accounts receivable.
With respect to Year 2000 compliance by the software products used in
the Company's internal software systems, the vendor of the Company's financial
and accounting systems has advised the Company that the current version of such
vendor's product is Year 2000 compliant and that the Company will receive such
version at no additional cost under such vendor's maintenance program. If the
Merger is not consummated, the Company currently intends to install such version
during the third quarter of 1998. The Company believes that its technical
support system, being the Company's other primary internal software system, is
Year 2000 compliant. Accordingly, the Company does not anticipate that it will
incur any material costs in connection with addressing Year 2000 compliance of
its internal systems.
With respect to Year 2000 compliance by the software products sold by
the Company, certain of such products are currently Year 2000 compliant, and the
Company is testing its other products for Year 2000 compliance and believes such
testing will be substantially complete by the end of the third quarter of 1998.
The Company does not anticipate that it will incur any material costs in
connection therewith.
To date, inflation has not had a material impact on the Company's
financial results.
On March 14, 1996, a class action lawsuit was filed against FTP and
certain of its current and former officers alleging violations of Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 10b-5 thereunder. On February 23, 1996, a class action lawsuit
was filed against Firefox and certain of its current and former officers and
former directors also alleging violations of Sections 10(b) and 20(a) of the
Exchange Act and Rule 10b-5. For a more detailed description of these legal
proceedings, see Note 3 to the Company's consolidated financial statements
included above. Each of FTP and Firefox has reviewed the allegations in the
lawsuit against it, believes such allegations to be without merit and intends to
defend itself and its officers vigorously. In order to support an adequate
defense, each of FTP and Firefox has spent and expects to continue to spend
substantial sums for legal and expert fees and costs. The costs of defending
each lawsuit and the ultimate outcome of each lawsuit are uncertain and cannot
be estimated. If the lawsuit against FTP were ultimately determined adversely to
FTP, or if the lawsuit against Firefox were ultimately determined adversely to
Firefox, such company could be required to pay a substantial judgment, which
could have a material adverse effect on the Company's consolidated business,
financial condition and results of operations.
Looking forward, if the Merger is not consummated, the Company
believes that its available cash, cash equivalents and short-term investments
will be sufficient to fund its ordinary operating expenses at least through
1998.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
For a description of certain legal proceedings involving FTP and a
description of certain legal proceedings involving Firefox, see "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part I of this Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 11, 1998, the Company held its 1998 annual meeting of
stockholders for the purposes of: (i) electing Kevin J. Burns and Vinton G. Cerf
as Class II Directors, to serve until the 2001 annual meeting of stockholders of
the Company or until the qualification and election of their successors; (ii)
considering a proposal to approve an amendment to the Company's 1996 Executive
Equity Incentive Plan to (A) increase the total number of shares of Common Stock
with respect to which awards may be granted from 1,500,000 to 2,100,000 and (B)
increase the total number of shares of Common Stock with respect to which
restricted stock awards may be granted from 100,000 to 200,000 (the "Executive
Equity Incentive Plan Proposal"); and (iii) considering a proposal to approve
the FTP Software, Inc. Amended and Restated 1993 Non-Employee Directors' Stock
Option Plan (the "Non-Employee Directors' Stock Option Plan Proposal"). The
results of the votes were as follows:
1. Election of Class II Directors:
Nominee For Against Withheld Broker Non-Votes
- ------- ---------- ------- -------- ----------------
Mr. Burns 27,771,991 0 2,013,802 0
Dr. Cerf 27,954,101 0 1,831,692 0
The following persons continued as directors following the meeting: Class I
Directors -- David D. Clark and F. David Fowler; Class III Directors -- Glenn C.
Hazard and Louise M. Cromwell.
2. The Executive Equity Incentive Plan Proposal:
For Against Withheld Broker Non-Votes
---------- --------- -------- ----------------
23,988,042 5,640,186 157,565 0
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote and present at the meeting in person or by proxy
(29,785,793 shares) was required to approve this proposal, in accordance with
the rules of the NASD.
3. The Non-Employee Directors' Stock Option Plan Proposal:
For Against Withheld Broker Non-Votes
---------- --------- -------- ----------------
24,606,600 4,986,177 193,016 0
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The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote and present at the meeting in person or by proxy
(29,785,793 shares) was required to approve this proposal, in accordance with
the rules of the NASD.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. EXHIBITS:
EXHIBIT NO. TITLE
- ----------- -----
3.1 Restated Articles of Organization of the Company(1)
3.2 Certificate of Designation, Preferences and Rights of Junior
Preferred Stock of the Company(1)
3.3 Articles of Amendment to Restated Articles of Organization of
the Company(2)
3.4 Amended and Restated Bylaws of the Company(1)
4.1 Specimen common stock certificate(1)
4.2 Rights Agreement dated as of December 1, 1995 between the
Company and State Street Bank and Trust Company, as Rights Agent
(including form of Rights Certificate)(1)
4.3 Amendment to Rights Agreement dated as of November 7, 1996
between the Company and State Street Bank and Trust Company, as
Rights Agent(2)
4.4 Amendment No. 2 to Rights Agreement dated as of February 27,
1998 between the Company and State Street Bank and Trust
Company, as Rights Agent(3)
4.5 Amendment No. 3 to Rights Agreement dated as of June 15, 1998
between the Company and State Street Bank and Trust Company, as
Rights Agent(4)
10.1 Indenture of Lease between the Company and North Andover Mills
Realty dated November 19, 1991(1)
10.2 Amendment No. 1 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of September 1, 1992(1)
10.3 Amendment No. 2 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of January 6, 1993(1)
10.4 Amendment No. 3 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of June 18, 1993(1)
10.5 Amendment No. 4 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of September 30, 1993(1)
10.6 Amendment No. 5 to Indenture of Lease between the Company and
North Andover Mills Realty Limited Partnership dated August 12,
1995(1)
10.7 Employment Agreement between the Company and Glenn C. Hazard
dated as of July 29, 1996(2)
10.8 Amendment No. 1 to Employment Agreement between the Company and
Glenn C. Hazard dated as of June 19, 1997(5)
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EXHIBIT NO. TITLE
- ----------- -----
10.9 Amendment No. 2 to Employment Agreement between the Company and
Glenn C. Hazard dated as of September 4, 1997(6)
10.10 Amended and Restated Employment Agreement between the Company
and Glenn C. Hazard dated as of December 12, 1997(7)
10.11 Second Amended and Restated Employment Agreement between the
Company and Glenn C. Hazard dated as of June 13, 1998*
10.12 Employment Agreement between the Company and Douglas F. Flood
dated as of July 23, 1996(2)
10.13 Amendment No. 1 to Employment Agreement between the Company and
Douglas F. Flood dated as of June 19, 1997(5)
10.14 Amendment No. 2 to Employment Agreement between the Company and
Douglas F. Flood dated as of September 4, 1997(6)
10.15 Amended and Restated Employment Agreement between the Company
and Douglas F. Flood dated as of December 12, 1997(7)
10.16 Termination Agreement between the Company and Douglas F. Flood
dated as of June 13, 1998*
10.17 Employment Agreement between the Company and John A. Kimberley
dated as of the "Effective Date" of the Firefox merger(2)
10.18 Amendment No. 1 to Employment Agreement between the Company and
John A. Kimberley dated as of June 19, 1997(5)
10.19 Employment Agreement between the Company and Dennis Leibl dated
as of December 12, 1997(7)
10.20 Amended and Restated Employment Agreement between the Company
and Dennis Leibl dated as of June 13, 1998*
10.21 Employment Agreement between the Company and Peter R. Simkin
dated as of the "Effective Date" of the Firefox merger, together
with Amendment No. 1 thereto dated August 24, 1996(2)
10.22 Amendment No. 2 to Employment Agreement between Company and
Peter R. Simkin dated as of December 15, 1996(5)
10.23 Amendment No. 3 to Employment Agreement between Company and
Peter R. Simkin dated as of June 19, 1997(5)
10.24 Employment Agreement between the Company and James A. Tholen
dated as of April 6, 1997(5)
10.25 Amended and Restated Employment Agreement between the Company
and James A. Tholen dated as of December 12, 1997(7)
10.26 Second Amended and Restated Employment Agreement between the
Company and James A. Tholen dated as of June 13, 1998*
10.27 FTP Software, Inc. Stock Option Plan(1)
10.28 FTP Software, Inc. 1996 Executive Equity Incentive Plan(2)
10.29 FTP Software, Inc. 1997 Employee Equity Incentive Plan(5)
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EXHIBIT NO. TITLE
- ----------- -----
10.30 FTP Software, Inc. Amended and Restated 1993 Non-Employee
Directors' Stock Option Plan*
10.31 Indenture of Lease between the Company and Andover Mills Realty
Limited Partnership dated as of October 1, 1993(1)
10.32 Amendment No. 1 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of
February 10, 1994(1)
10.33 Amendment No. 2 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of June 7,
1995(1)
10.34 Amended and Restated Agreement and Plan of Merger by and among
the Company, Firefox Acquisition Corp. and Firefox
Communications Inc. dated as of May 21, 1996(9)
10.35 Composite Agreement and Plan of Reorganization by and among the
Company, NetManage, Inc. and Amanda Acquisition Corp. dated as
of June 15, 1998, as amended by Amendment No. 1 dated as of June
30, 1998 and Amendment No. 2 dated as of July 14, 1998(10)
27 Financial Data Schedule*
99 Cautionary Factors(11)
- ---------------------
*Filed with this Report.
(1) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Registration Statement on Form S-4 (No. 333-06917) filed with
the Securities and Exchange Commission (the "Commission") on June 26, 1996.
(2) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 filed with the Commission on November 14, 1996.
(3) Included as an exhibit to, and incorporated in this Report by reference to,
Amendment No. 2 on Form 8-A/A to the Company's Registration Statement on
Form 8-A filed with the Commission on July 9, 1998.
(4) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Curent Report on Form 8-K dated June 15, 1998 filed with the
Commission on June 19, 1998.
(5) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997 filed with the Commission on August 14, 1997.
(6) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14, 1997.
(7) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Annual Report on Form 10-K for the year ended December 31,
1997 filed with the Commission on March 30, 1998.
(8) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Annual Report on Form 10-K for the year ended December 31,
1996 filed with the Commission on March 31, 1997.
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(9) Included as Appendix A to, and incorporated in this Report by reference to,
the Company's Joint Proxy Statement/Prospectus filed with the Commission on
July 1, 1996.
(10) Included as Appendix A to, and incorporated in this Report by reference to,
the Company's Joint Proxy Statement/Prospectus included in the Registration
Statement on Form S-4, Registration Number 333-59101, of NetManage, Inc.
filed with the Commission on July 15, 1998.
(11) Incorporated by reference to the section entitled "Risk Factors" of the
Company's Joint Proxy Statement/Prospectus included in the Registration
Statement on Form S-4, Registration Number 333-59101, of NetManage, Inc.
filed with the Commission on July 15, 1998.
b. REPORTS ON FORM 8-K:
On June 19, 1998, the Company filed with the Commission a Current
Report on Form 8-K dated June 15, 1998 with respect to (i) the execution by the
Company of the Reorganization Agreement and (ii) the execution by the Company of
Amendment No. 3 to the Rights Agreement dated as of December 1, 1995 between the
Company and State Street Bank and Trust Company, as Rights Agent, as amended by
Amendment to Rights Agreement dated as of November 7, 1996 and by Amendment No.
2 to Rights Agreement dated as of February 27, 1998 (as amended, the "Rights
Agreement"). Amendment No. 3 amends the Rights Agreement to permit the parties
to the Reorganization Agreement to consummate the Merger without triggering the
exercisability of the Rights (as defined in the Rights Agreement).
On July 24, 1998, the Company filed with the Commission a Current
Report on Form 8-K dated July 23, 1998 with respect to its July 23, 1998
announcement of its results of operations for the second quarter of 1998, and
the effect of the same on the Exchange Ratio under the Reorganization Agreement,
as more particularly described in Item 2 of Part I of this Report.
On August 10, 1998, the Company filed with the Commission a Current
Report on Form 8-K dated August 10, 1998 with respect to the Company's August
10, 1998 announcement regarding net revenues for July 1998 and the effect of the
same on the Exchange Ratio under the Reorganization Agreement, as more
particularly described in Item 2 of Part I of this Report.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FTP SOFTWARE, INC.
Date: August 14, 1998 By: /s/ James A. Tholen
----------------------------------------------
James A. Tholen,
Senior Vice President, Chief Operating Officer
and Chief Financial Officer
(principal financial and accounting officer)
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25
EXHIBIT INDEX
EXHIBIT NO. TITLE
- ----------- -----
3.1 Restated Articles of Organization of the Company(1)
3.2 Certificate of Designation, Preferences and Rights of Junior
Preferred Stock of the Company(1)
3.3 Articles of Amendment to Restated Articles of Organization of the
Company(2)
3.4 Amended and Restated Bylaws of the Company(1)
4.1 Specimen common stock certificate(1)
4.2 Rights Agreement dated as of December 1, 1995 between the Company
and State Street Bank and Trust Company, as Rights Agent
(including form of Rights Certificate)(1)
4.3 Amendment to Rights Agreement dated as of November 7, 1996 between
the Company and State Street Bank and Trust Company, as Rights
Agent(2)
4.4 Amendment No. 2 to Rights Agreement dated as of February 27, 1998
between the Company and State Street Bank and Trust Company, as
Rights Agent(3)
4.5 Amendment No. 3 to Rights Agreement dated as of June 15, 1998
between the Company and State Street Bank and Trust Company, as
Rights Agent(4)
10.1 Indenture of Lease between the Company and North Andover Mills
Realty dated November 19, 1991(1)
10.2 Amendment No. 1 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of September 1, 1992(1)
10.3 Amendment No. 2 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of January 6, 1993(1)
10.4 Amendment No. 3 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of June 18, 1993(1)
10.5 Amendment No. 4 to Indenture of Lease between the Company and
North Andover Mills Realty dated as of September 30, 1993(1)
10.6 Amendment No. 5 to Indenture of Lease between the Company and
North Andover Mills Realty Limited Partnership dated August 12,
1995(1)
10.7 Employment Agreement between the Company and Glenn C. Hazard dated
as of July 29, 1996(2)
10.8 Amendment No. 1 to Employment Agreement between the Company and
Glenn C. Hazard dated as of June 19, 1997(5)
10.9 Amendment No. 2 to Employment Agreement between the Company and
Glenn C. Hazard dated as of September 4, 1997(6)
10.10 Amended and Restated Employment Agreement between the Company and
Glenn C. Hazard dated as of December 12, 1997(7)
10.11 Second Amended and Restated Employment Agreement between the
Company and Glenn C. Hazard dated as of June 13, 1998*
i
26
EXHIBIT NO. TITLE
- ----------- -----
10.12 Employment Agreement between the Company and Douglas F. Flood
dated as of July 23, 1996(2)
10.13 Amendment No. 1 to Employment Agreement between the Company and
Douglas F. Flood dated as of June 19, 1997(5)
10.14 Amendment No. 2 to Employment Agreement between the Company and
Douglas F. Flood dated as of September 4, 1997(6)
10.15 Amended and Restated Employment Agreement between the Company and
Douglas F. Flood dated as of December 12, 1997(7)
10.16 Termination Agreement between the Company and Douglas F. Flood
dated as of June 13, 1998*
10.17 Employment Agreement between the Company and John A. Kimberley
dated as of the "Effective Date" of the Firefox merger(2)
10.18 Amendment No. 1 to Employment Agreement between the Company and
John A. Kimberley dated as of June 19, 1997(5)
10.19 Employment Agreement between the Company and Dennis Leibl dated as
of December 12, 1997(7)
10.20 Amended and Restated Employment Agreement between the Company and
Dennis Leibl dated as of June 13, 1998*
10.21 Employment Agreement between the Company and Peter R. Simkin dated
as of the "Effective Date" of the Firefox merger, together with
Amendment No. 1 thereto dated August 24, 1996(2)
10.22 Amendment No. 2 to Employment Agreement between Company and Peter
R. Simkin dated as of December 15, 1996(5)
10.23 Amendment No. 3 to Employment Agreement between Company and Peter
R. Simkin dated as of June 19, 1997(5)
10.24 Employment Agreement between the Company and James A. Tholen dated
as of April 6, 1997(5)
10.25 Amended and Restated Employment Agreement between the Company and
James A. Tholen dated as of December 12, 1997(7)
10.26 Second Amended and Restated Employment Agreement between the
Company and James A. Tholen dated as of June 13, 1998*
10.27 FTP Software, Inc. Stock Option Plan(1)
10.28 FTP Software, Inc. 1996 Executive Equity Incentive Plan(2)
10.29 FTP Software, Inc. 1997 Employee Equity Incentive Plan(5)
10.30 FTP Software, Inc. Amended and Restated 1993 Non-Employee
Directors' Stock Option Plan*
10.31 Indenture of Lease between the Company and Andover Mills Realty
Limited Partnership dated as of October 1, 1993(1)
10.32 Amendment No. 1 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of February 10,
1994(1)
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27
EXHIBIT NO. TITLE
- ----------- -----
10.33 Amendment No. 2 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of June 7,
1995(1)
10.34 Amended and Restated Agreement and Plan of Merger by and among the
Company, Firefox Acquisition Corp. and Firefox Communications Inc.
dated as of May 21, 1996(9)
10.35 Composite Agreement and Plan of Reorganization by and among the
Company, NetManage, Inc. and Amanda Acquisition Corp. dated as of
June 15, 1998, as amended by Amendment No. 1 dated as of June 30,
1998 and Amendment No. 2 dated as of July 14, 1998(10)
27 Financial Data Schedule*
99 Cautionary Factors(11)
- --------------------------
*Filed with this Report.
(1) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Registration Statement on Form S-4 (No. 333-06917)
filed with the Securities and Exchange Commission (the "Commission") on
June 26, 1996.
(2) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 filed with the Commission on November 14, 1996.
(3) Included as an exhibit to, and incorporated in this Report by reference
to, Amendment No. 2 on Form 8-A/A to the Company's Registration Statement
on Form 8-A filed with the Commission on July 9, 1998.
(4) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Current Report on Form 8-K dated June 15, 1998 filed
with the Commission on June 19, 1998.
(5) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 filed with the Commission on August 14, 1997.
(6) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14, 1997.
(7) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Annual Report on Form 10-K for the year ended December
31, 1997 filed with the Commission on March 30, 1998.
(8) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Annual Report on Form 10-K for the year ended December
31, 1996 filed with the Commission on March 31, 1997.
(9) Included as Appendix A to, and incorporated in this Report by reference
to, the Company's Joint Proxy Statement/Prospectus filed with the
Commission on July 1, 1996.
(10) Included as Appendix A to, and incorporated in this Report by reference
to, the Company's Joint Proxy Statement/Prospectus included in the
Registration Statement on Form S-4, Registration Number 333-59101, of
NetManage, Inc. filed with the Commission on July 15, 1998.
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28
(11) Incorporated by reference to the section entitled "Risk Factors" of the
Company's Joint Proxy Statement/Prospectus included in the Registration
Statement on Form S-4, Registration Number 333-59101, of NetManage, Inc.
filed with the Commission on July 15, 1998.
iv